By Boldizsar Gyori

BUDAPEST, June 10 (Reuters) -The forint led losses among central European currencies on Monday after Hungarian inflation rose less than expected, keeping rate cut expectations alive.

Data showed Hungary's inflation HUCPIY=ECI, which hit a European Union high of over 25% last year, was an annual 4% in May, the top of the central bank's policy target band.

"Inflation accelerated below expectations, which fuelled the market's rate-cut expectations," a Budapest trader said. "Right now it is up in the air whether the central bank will cut 25 or 50 basis points (bps)."

Hungary's forint EURHUF= had weakened 0.2% against the euro to trade at 392.4 by 0808 GMT.

Deputy central bank governor Barnabas Virag said on Monday that strong service sector inflation and high wage dynamics meant a careful and patient monetary policy was needed.

Virag has previously signalled the base rate could fall to 6.75%-7% by the end of June, implying a 25-bps or a 50-bps cut from current levels.

Elsewhere in the region, the zloty EURPLN= returned to trade at 4.31 against the euro after touching a one-month low at 4.32 in early trade.

ING BSK analysts said room for the zloty to weaken against the euro in the short term had been exhausted.

"The current weakening of the zloty is due to large revaluations of expectations for (U.S.) Fed rate cuts, while domestic fundamentals remain supportive," they said in a note.

They pointed to a sharp rise in U.S. payrolls in data published on Friday sending the dollar higher against the euro, which - in addition to the closing of carry trade positions - hurt central European currencies.

"A correction/strengthening of the zloty at the beginning of the week seems quite likely, unless EUR/USD deepens the decline already at the beginning of the week," ING BSK said.

The Czech crown EURCZK= held at stronger levels after hitting nearly five-month highs last week below the 24.60 per euro level. It traded at 24.623 on Monday.

Attention was turning to May inflation data due on Tuesday, with analysts expecting a slight slowdown after a surprise jump in the previous month.

"But if there was a bigger upward surprise like in the previous month, the crown could go on the offensive," bank CSOB said. "On the other hand, the crown should be watching international markets - mainly the Fed sitting (this week) that could close any space for profits."

Reporting by Boldizsar Gyori in Budapest, additional reporting by Badohal Karol in Warsaw and Jason Hovet in Prague; Editing by Mark Potter

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